What time frame do you prefer for your CTL strategy.

The result of the small poll we had on this blog totally surprised me. We had 21 votes with the following result:

What time frame do you prefer for a strategy to run?

33% prefers the 5 min chart

19% prefers the 15 min chart

14% prefers the 30 min chart

33% prefers the 1 chart chart

Why does this surprise me? Well there are some arguments for the small time frames.

First of all the information that is in the big time frames are in the small time frames as well. But not the opposite. For example you can make a strategy run based on the shape of a 1 hour candle on a 5 min chart but you can't make a strategy base its entries on the shape of a 5 min candle on the 1 hour chart. With some coding you can easily recalculated the open,close, high and low of the 1 hour candle on the 5 min chart but you can't code and calculate what the shape of the 5 min candles were when the strategy runs on the 1 hour chart.

The second reason is that a CTL strategy basically runs from candle to candle. A big disadvantage of the big time frames is that you can't exit when the candle isn't finished yet. Of course there are workarounds for this like putting an order just before the candle starts but those workarounds have big disadvantages. On the 1 hour chart you have to decide the levels of those orders before the candle starts and you can't change the orders before the candle is finished. Another big disadvantage of this workaround is that for the strategy it is hard to detect if those orders were triggered or not.

There is a lot of “noise” on the smaller time frames. I can't argue that. But that doesn't mean you have to trade the “noise”. I you base your entries on a 200 bar moving average on the 5 min chart is that trading the noise? I don't think so.

There are clearly some advantages of running a strategy on a big time frame as well. The main advantage is that the coding is easier if your strategy is a long term strategy. The calculation of big time indicators on the smaller time frames isn't always that easy. Another advantage is that trading on a big time frame often also urged you to trade with a smaller position size. Reducing the risk.

Anyway the time frame that you want to use depends mainly on the strategy you are going to program. You can't ask a scalper to write a CTL strategy on a 4 hour chart and you can't ask somebody who is used to trade on the day chart to switch to the 1 min chart. After writing some test strategy you will find the time frame that will fit your trading style best.